|Due By (Pacific Time)||11/27/2016 12:00 am|
#1) After looking at a fixed rate loan, Ace Campbll Mfg. entered into a floating rate loan agreement. This loan is set at 39 basis points (or 39%) over an index based on LIBOR. Ace Campbell is concerned that the LIBO index may go up, causing the loan to climb. That concern comes from the fact that the rate on the loan adjusts weekly based on the closing value of the LIBOR for the previous week. Fortunately for Ace Cambell this loan has a maximum annual rate of 2.23%. It also has a minimum annual rate of #1.51 %. Given the following information, calculate the interest rate that Ace Campbell would pay during weeks 2-10.
week 1 1.96%
week 2 1.66%
week 3 1.46%
week 4 1.35 %
week 5 1.56%
week 6 1.64 %
week 7 1.67%
week 8 1.94%
week 9 1.87 %
The rate of interest for week 2 is ------------% round to two decimal places)
#2) A bond that matures in 2 yrs has a $1,000 par value. The annual coupon interest rate is 7% and the market's required yield to maturity on a comparqble risk bond is 14%. What would be the alue of this bond if it paid interest annually? What would be the value of this bond if it paid interest semiannually? (a) value of this bond if it paid interest annually would be $----------- round to nearest cent).
#3) Pybus, Inc. is considering issuing bondsthat will mature in 23 yrs. with an annual coupon rate of 12%. Their par value will be $1,000 and the interest will be paid semiannually. Pybus is hoping to get a AA rating on its bonds and ,if it does, the yield to maturity on similar AA bonds is 10.5 %. However, Pybus is not sure whether the new bonds will receive a AA rating. If they receive an A rating the yield to maturity on similar A bonds is 11.5%. What will be the price of these bonds if they receive either an A or a AA rating?
(a) the price of the Pybus bonds if they receive a AArating will be $---------round to nearest cent).
(b) what will be the price of these bonds if they receive a A rating?-------------
#4) A bond market price is $875. It has a $1,000 par value, will mature in 14 yrs, and has a coupon interest rate of 8% annual interest, but makes its interest payments semiannually. What is the bond's yield to maturity? What happens to the bond's yield to maturity if the bond matures in 28 years? What if it matures in 7 yrs.? (a) bond's yield to maturity if it matures in 14 years is --------% round to two decimal places)
(b) what happens to the bonds yield to maturity if it matures in 28 yrs (c) what if bond matures in 7 yrs.?
#5)Seven years ago XYZ international issued some 32 year zero coupon bonds that were priced with a market's required yield to maturity of 12% and par value of $1,000. What did these bonds sell for when they were issued? Now that 7 yrs have passed and the market's required yield to maturity on these bonds has climbed to 14 %, what ar they selling for? If the market's required yield to maturity had fallen to 10% what would they have been selling for?
#6)The Saleem Corporation's $1,000 bonds pay 9% interest annually and have 14 years until maturity.You can purchase the bond for $945. (a) What is the yield to maturity on this bond?
(b)Should you purchase the bond if the yield to maturity on a comparable risk bond is 8 %?
#7) What would you expect the nominal rate of interest to be if the real rate is 3.9 % and the expected inflation rate is 7.3%?
#10) A bond of Telink Corporation pays $110 in annual interest, with a $1,000 par value. The bonds mature in 25 years. The market's required yield to maturity on a comparable risk bond is 10%.
(a) What is the value of the bond if the market's required yield to maturity on a comparable risk bond is 10%?
(b) How does the value change if the market's required yield to maturity on a comparable risk bond (i) increases to13 % or (ii) decreases to 5 %?
(c) interprret your findings in parts (a) and (b).
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